On Free Agency, Contract Renegotiation and The Canadian Dollar.

Ordinarily at this time of year I’d be looking forward to the start of the NHL’s unrestricted free agent period, but this year’s market is so devoid of notable talent that my thoughts have drifted elsewhere.

Sorry to disappoint those of you giddy about second-tier talent lining up for big raises they don’t deserve, but I’m just not feeling the excitement over where David Clarkson, Stephen Weiss, Valtteri Filppula or Mike Ribeiro goes.

Not that I blame those players. They’re likely to cash in big this summer, and since there will be NHL general managers dumb enough to pay them outrageous salaries, who can blame those players for reaching for the brass ring?

But let’s face it, the UFA market in recent years has increasingly become devoid of star talent. Teams lock up their superstars to staggeringly expensive, long-term contracts, leaving only second-tier talent or fading stars as scraps to be bartered over in the free agent market.

Those long-term contracts – particularly those eight years or longer – could become troublesome for some teams.

Over time, the hefty contracts of Ilya Kovalchuk (15 years, $100 million), Shea Weber (14 years, $110 million), Zach Parise and Ryan Suter (13 years at $98 million each), Duncan Keith (13 years, $76 million), Sidney Crosby (12 years, over $104 million), Jonathan Quick (ten years, $58 million) and Jordan Staal (10 years, $60 million) could become millstones for their respective teams.

I singled these guys out because their contracts expire between 2023 and 2026, past the expiration of the current CBA in September 2022 (or September 2020, if the NHL or NHLPA uses their respective out-clauses by year eight).

If those aforementioned players are still in the league by then, their contracts will be worth less in real dollars than in the earlier years of their respective deals, but those supposedly cap-friendly average annual salaries could become burdensome.

That raises the possibility of the league seeking contract renegotiation during the next round of CBA talks.

I know, I know, contracts have always been guaranteed in the NHL, and the NHLPA will never accept renegotiation, they’ll fight it until the last dog is dead, blah-blah-blah.

Well, the same thing was said about a salary cap, and the league is entering its ninth season under one.

The players aren’t directly at fault for those big-ass contracts. Their agents and general managers got together, hashed out the details, and most of those players were only too happy to sign on the dotted line. I believe if the teams were dumb enough to offer those deals, they should be stuck with the consequences.

Still, it wouldn’t surprise me if renegotiation pops up in the next round, spurred by some of the teams who inked players to those ridiculously long contracts under the previous CBA.

Heck, they might even wish to get out of some of the contracts signed under the new CBA.

The current labor agreement limits contract lengths to eight years for re-signings, and seven years for UFA signings, with limits on salary variance over the course of those contracts. It’s possible, however, a team with two or three players under existing seven-or eight-year deals could seek the right to renegotiate if they feel those players aren’t playing up to the level of their salaries.

It might not just the teams owners who seek to renegotiate contracts.

Roberto Luongo blamed his contract for the Canucks inability to trade him.

Following this year’s trade deadline, Roberto Luongo complained his contract prevented him from being dealt out of Vancouver. That got me wondering if some players might also seek the right to get out of expensive, virtually untradeable contracts in the next round of labor talks.

It could be a significant sticking point requiring considerable negotiation to resolve. Do teams get the right to cut players? Will players be allowed to request contract termination? Can both sides request the right to renegotiate salary and/or term? Should there be a set period of time before requesting renegotiation? A set of specific guidelines would have to be established, likely requiring arbitration to resolve.

Teams, rather than players, would likely push for renegotiation, seeing it as an opportunity to free up cap space for other players. Still, Luongo’s “my contract sucks” statement suggests some players might not mind the opportunity to get out of a bad deal.

Ah, but cap hits of $4 million-$6.6 million will be a triviality if the salary cap rises to the projected $90 million by 2021-22, right?

The NHL’s hockey-related revenue is currently chugging along nicely. Not even a lockout which killed half a season hurt its popularity.

The league is coming off its highest ratings in decades for the Stanley Cup Final, while ratings for the remainder of the playoffs and the regular season were among the highest in years.

Overpriced merchandise continues to fly off the shelves, while fans (particularly in the traditional hockey markets) are happily paying an average of $354.82 US (for a family of four) to attend an NHL game. Season ticket sales remains strong.

Among the league’s biggest revenue generators are its Canadian markets, with its seven teams accounting for nearly 35 percent of HRR, largely due to the Canadian dollar being at par for several years with the American dollar.

Overall this shouldn’t have much of an adverse effect on HRR. After all, the Canadian dollar was down to 94.8 cents in October 2011 yet league revenues didn’t significantly suffer, and of course the “loonie” quickly rallied. The increasing popularity of hockey in its traditional American markets and in some of their southern ones (like Los Angeles) should off-set the difference.

Most economic experts aren’t projecting any significant decline in the Canadian dollar in the coming years. They’re probably right. Still, experts sometimes can be wrong.

Ten years ago, the value of the Canadian dollar was below .75 cents US. Earlier in the decade the loonie’s value was considerably lower (below .65 cents). The NHL had to implement a revenue-sharing scheme to help its smaller-market Canadian clubs. The value of the “loonie” had been so low for so long, a cover story in MacLean’s magazine advocated adopting American currency.

During the early years of the previous CBA, the salary cap was trumpeted as the salvation of Canadian teams. That, of course, was bullshit. The real salvation, and the driving force behind the rapid rise of HRR over the course of the previous CBA, was the rising value of the Canadian dollar.

An indication of how fluctuations in the Canadian dollar affected NHL HRR was the miniscule $100K increase in the salary cap from $56.7 million in 2008-09 to $56.8 million in 2009-10. During the ’08-’09 season, the world economy cratered (which most economists failed to predict), and the value of the Canadian dollar plunged from almost par to .77 cents US by early-March 2009. NHL HRR suffered as a result.

The loonie’s value subsequently rallied, rising steadily over the next two years to remain at or above par with the US dollar. As a result, NHL HRR rose accordingly. The addition of another Canadian team (the relocation of the Atlanta Thrashers to Winnipeg in 2011 and their rebranding as the Jets) also bolstered HRR.

As long as the Canadian dollar doesn’t suffer a significant decline in value over the course of the current CBA (again, assuming it lasts until 2022), league revenue should remain strong. The possibility of either franchise relocation or expansion into Quebec City, Southern Ontario or Seattle during this period could also significantly boost HRR.

Even if the value of the “loonie” declined to around .90 cents and remained there for a sustained period, HRR should continue growing and the inevitable $90 million salary cap by 2021-22 could be achievable.

However, if the “loonie” should significantly plunge below the .90 cent mark for a prolonged period, that could significantly slow the growth of HRR and the salary cap.

It probably won’t happen, and I daresay I’ll get criticized for even daring to suggest it, but if the past ten years have taught me anything about the economy and the business of hockey, it’s to expect the unexpected.

A significant drag on the growth of HRR will slow the growth of the salary cap. In turn, those lengthy contracts could become more burdensome for their teams in the latter years of this CBA.

Contract renegotiation could start looking pretty good to some of those teams.

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